Market analysis and segmentation
GEOG 40323
January 23, 2018
Business analytics

Doing business geographically
- Let’s say you want to open a new franchise for your company. What do you need to know?
- Brainstorm!
Doing business geographically
- Activities (among others) might include:
- Geodemographic segmentation
- Trade area analysis
- Analysis of competitors’ locations
Geodemographic segmentation
How segmentation works
- Most common method for geodemographic segmentation: k-means clustering
- Goal: to partition individual units into k groups based on attribute similarity
How k-means clustering works
- k cluster “centers” are chosen for a given distribution of data (either a priori by the analyst or at random)
- Points are assigned to a cluster based on proximity in data space
- Cluster centers are then re-calculated, and points re-assigned based on proximity to the new centers
- The algorithm “converges” when data points stop switching clusters
- Graphical illustration: http://www.naftaliharris.com/blog/visualizing-k-means-clustering/
K-means clustering in ArcGIS
- Available via the “Grouping Analysis” tool in the Spatial Statistics toolbox
- Let’s try it out!
Trade area analysis
- Analysis of characteristics of area from which a business generates a majority of its customers
- Trade areas can be defined by:
- Euclidean or network distance
- Customer geography
- Gravity modeling
- Common sense
Business Analyst
- Business Analyst for Desktop: comprehensive add-on to ArcGIS with detailed demographic & business data along with modeling functionality
- Business Analyst Online: Web-based interface to Business Analyst; less functionality than BA Desktop but very intuitive
- Let’s try it out! https://bao.arcgis.com/esriBAO/login/
Trade area analysis in BAO
Competitor location analysis in BAO